RBI could have valued LVB suitably: Promoter
Says central bank need not give LVB free of cost to DBS Bank
Chennai: The Reserve Bank of India (RBI) could have started a competitive process for the 94-year-old Karur based Lakshmi Vilas Bank (LVB) so that a proper valuation of the bank could have been arrived at, said one of the promoters of LVB.
The RBI could have dealt with LVB in an open manner than deciding to hand it over “free of cost in a hush-hush manner” to DBS Bank India, he said.
He also said Lord Venkataramana Swamy at Thanthonimalai being the first shareholder, will be the first loser in the RBI proposed deal.
“The shareholder folio number 1 is in the name of the Lord Venkataramana Swamy the presiding deity at the famed temple in Thanthonimalai (in Tamil Thanthondrimalai — mountain that appeared on its own),” K.R.Pradeep one of the promoters of LVB said.
“Without a depositors run on the bank, no risk of increased lending and the bank facing no crisis the RBI need not have decided to give the LVB free of cost to DBS Bank India a wholly-owned subsidiary of DBS Bank Ltd, Singapore, without any bidding raises several questions,” Pradeep said.
“The RBI could have asked the boards of LVB and DBS Bank India to come out with a merger plan that is acceptable to all. The RBI could have started a competitive process so that a proper valuation could have been derived,” Pradeep added.
On Tuesday when RBI announced palming of LVB to DBS Bank India the market capitalisation of the bank was Rs 600 crore, Pradeep said.
The LVB has a network of 563 branches while DBS Bank India has only 33. The amalgamation will give a jump start for DBS Bank India with a ready made branch network.
According to Pradeep, RBI should revisit LVB’s valuation.
“If LVB is handed over free of cost a bank owned by Government of India then it is understandable, but handing it over to a foreign bank is strange,” Pradeep said.
Pradeep said LVB’s networth is positive. The provision coverage is about 80 per cent and the capital erosion is due to provisions. “In 1-3 years when the loans are recovered then these provisions will be reversed. When that happens it is DBS Bank India which would unduly benefit,” Pradeep said.
Lack of transparency in LVB-DBS Bank amalgamation: AIBEA
Chennai: The decision of Reserve Bank of India (RBI) to palm off 94-year-old Karur based Lakshmi Vilas Bank (LVB) to DBS Bank India Ltd, a wholly-owned subsidiary of DBS Bank Ltd, Singapore, smacks of arbitrariness and lack of transparency, said a top leader of All India Bank Employees’ Association (AIBEA).
“There would have been several groups interested in LVB with its extensive branch network and deposit base. The RBI did not make any open bid for LVB. From where DBS Bank India came in and how RBI zeroed in on that bank is not known,” CH Venkatachalam, General Secretary, AIBEA said.
On Tuesday, the RBI announced its decision to amalgamate the LVB with the DBS Bank India.
Venkatachalam said as per RBI, DBS Bank India will bring in additional capital of Rs 2,500 crore upfront, to support business growth of the merged entity but there are no timelines mentioned.
“The fundamental question is why only DBS Bank India and why not others? Why no bids were issued? It is agreed that RBI may have powers, but those powers should be exercised in a transparent manner and not arbitrarily,” Venkatachalam said.
He charged RBI of handing over LVB to DBS Bank India overnight in an arbitrary manner.
According to Venkatachalam, LVB has a brand equity and goodwill apart from immovable assets. If the immovable assets are revalued then there will be some money for the shareholders.
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